New York is slowly fixing the Empire Zone tax break program. For seven years, businesses exploited the program's loopholes to grab millions of dollars worth of tax breaks while creating few jobs.

Gov. Eliot Spitzer's administration has launched a multipronged effort to weed out some abusers of a program that costs New York taxpayers $600 million a year.

Recently, the state's tax department denied $1.7 million in Empire Zone tax credits to five businesses for 2005. That crackdown for the first time targeted so-called shirt-changers, companies that changed their names to qualify for tax breaks intended for true start-ups.

Because businesses can claim the tax breaks for up to 13 years, the audits will eventually save New York a projected $17 million, said Tom Bergin, tax department spokesman.

The tax department is auditing the returns of 19 more businesses that may have received big Empire Zone tax breaks by simply changing their corporate names, and it plans to audit 150, Bergin said. Meanwhile, this month Empire State Development Corp., which runs the program, notified 180 businesses -- including 39 in five counties surrounding Syracuse -- that the state may kick them out of the program.

"Unfortunately, some of these businesses have been taking advantage of a system that needs to be fixed," agency co-chairman Patrick Foye testified Monday in Albany at a state budget hearing.

The 180 businesses missed by at least 60 percent the job creation or investment projections they made to qualify for the program. Those businesses, which the agency would not identify, were given 10 days to explain to the state why they should not be expelled, said A.J. Carter, an Empire State Development Corp. spokesman.

"There's probably some companies that should be decertified," said Donald Western, Onondaga County's Empire Zone coordinator. "My guess is there will be."

In his proposed 2008 budget, Spitzer said the state will save $50 million per year, beginning this year, by kicking out companies that didn't hit job or investment goals. Since 2001, when the Empire Zone program took off, the state hasn't booted any businesses for that reason.

It's not clear whether the state can legally do that, said certified public accountant Daniel Fordham, of Plattsburgh, and David Gross, of Buffalo, who has written an Empire Zone reference manual.

Within months, an administrative law judge is expected to issue a ruling in the state's first attempt to disqualify a company for missing its targets. That case involves 81 & 13 Cortland Associates, which owns Riverside Plaza, a half-vacant strip mall in Cortland.

Meanwhile, records obtained this month by The Post-Standard show the program remains full of companies getting multimillion-dollar tax breaks without creating many jobs.

The agency released records in which 9,000 businesses told it how much they intended to claim on their 2006 tax returns.

The records show that businesses continue to claim millions of dollars in credits without adding many workers. For instance:

- NRG Energy wants $20.4 million in tax breaks for old power plants that either rarely operate or are among the state's worst polluters.
- Bond, Schoeneck & King -- a 110-year-old Syracuse-based law firm that wants $1.47 million in tax credits for 2006 -- shuffled paperwork to make itself look new and qualify for bigger Empire Zone incentives.
- The Pyramid Cos. expected $11.8 million in tax breaks for Carousel Center and shopping centers in Watertown and Utica.

Although the program was first designed to spur job creation in depressed areas, 1,317 businesses with three or fewer workers expected $88 million in credits for 2006.

Big-box stores, such as The Home Depot and Lowe's, command millions per year in tax breaks while smaller, locally owned competitors pay their full taxes.

Other zone businesses are rewarded for creating low-paying jobs.

Servus Hotel Group, which owns the Holiday Inn in Auburn, expected nearly $297,000 in tax breaks for 2006. It paid its workers an average of $7.25 per hour.

In all, 562 businesses expecting tax breaks paid their workers average wages between $5 and $8 per hour, according to the state records.

The state Legislature voted in 2005 to extend the program until 2011.

Last year, several key lawmakers, including Assemblyman Richard Brodsky, D-Westchester, and Sen. James Alesi, R-Rochester, said the program was not cost-effective and should be scrapped.

"The right thing is to amend it, not end it," Foye told lawmakers Monday.

Through years of changes that preceded Spitzer, the state has made it much harder for applicants to get into the program.

"In the past it was pretty much a willy-nilly thing. You could say you were going to hire one person and get into the Empire Zone system. Now, that's not the case," said Gross, who owns Sales Tax Solutions & Consulting, a Buffalo firm that helps businesses get tax breaks.

Some of the state's largest, oldest and most politically connected law firms continued to reduce their tax bills by millions of dollars by using a program intended for new businesses, records show.

Hodgson Russ, a Buffalo firm that can trace its roots to Presidents Millard Fillmore and Grover Cleveland, said it would claim about $1.6 million in tax credits in 2006, state records show. Bond, Schoeneck & King, at 110 years old, claimed about $1.5 million. Harris Beach claimed about $1.2 million. That firm employs state Sen. Michael Nozzolio, former Gov. Hugh Carey and Robert Ryan, a former state aide who helped draft the Empire Zone legislation.

Millions for malls

The Carousel Center's developers claimed about $9.7 million in tax credits, an increase of more than $2 million over the year before.

Mall developer Robert Congel and his Pyramid Cos. partners warned Syracuse leaders in 2002 that Empire Zone tax credits were necessary to turn the mall into Destiny USA, a multibillion-dollar resort.

The mall is far from the 40,000 promised jobs. In 2006 -- the year before its current mall expansion began -- Pyramid reported about 110 jobs, 37 of them part time. The mall will qualify for Empire Zone credits every year until 2015.

The state also reimbursed about $1 million in property taxes on the Watertown mall owned by Congel's son Scott Congel. And the state erased about $1.2 million in property taxes on the Congels' Riverside Center in Utica.

Helping national chains

New York state continued to refund tax payments to big-box retail chains, such as Lowe's home centers, Home Depot, Target and Wal-Mart. Locally owned stores who pay their full taxes have complained that the chains have enough unfair advantages.

NPG: $3.7 million

A contingent of company leaders and union workers from Magna International Inc. visited elected officials in Albany and Washington last week to ask for government grants for training and equipment at the New Process Gear plant in DeWitt.

As part of a tentative union contract agreement, the company has promised to keep the plant open for four years and to invest in new equipment and infrastructure. The contract will cut wages and benefits for senior workers.

NPG expected to claim $3.7 million in Empire Zone credits in 2006.

Shirt-changers

Some of the state's oldest companies erased their property, sales and corporate income taxes by taking advantage of loopholes in an early version of the Empire Zone law.

All a 100-year-old business had to do was file paperwork that made it look new and it qualified for tax breaks intended for start-ups.

The biggest "shirt-changers" were old energy companies.

NRG Energy claimed $20.5 million in 2006. The company employs fewer than 10 workers at its three hydropower plants, including the Oswego Steam Station. Erie Boulevard Hydropower claimed $14 million.

Tom Golisano bought the Buffalo Sabres hockey team, playing since 1970, and qualified for $508,000 in tax breaks in 2006. Anaren Microwave, since 1967, claimed $355,000.